UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q
                                   (Mark One)

     [X]  QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15 (d)
          OF THE  SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2009

                                       OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
          OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the transition period from ______ to ______

                          Commission File No. 0 - 20660

                               DIRECT INSITE CORP.
             (Exact name of registrant as specified in its charter)

                 Delaware                               11-2895590
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)               Identification No.)

     80 Orville Drive, Bohemia, N.Y.                     11716
 (Address of principal executive offices)             (Zip Code)

        Registrant's telephone number, including area code (631) 873-2900

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                        Yes [X]          No [ ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted  and posted  pursuant to Rule 405 of  Regulation  S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).

                        Yes [ ]          No [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated filer",  "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

     Large accelerated filer [ ]        Accelerated filer [ ]

     Non-accelerated filer [ ]          Smaller reporting company [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

The number of shares of $.0001 par value stock outstanding as of August 10, 2009
was: 10,799,239.
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                             Page
     <S>                                                                                                  <C>
     Item 1. Financial Statements.

     Condensed Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and
       December 31, 2008 .................................................................................   3
     Condensed Consolidated Statements of Income
       For the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)..............................   4

     Condensed Consolidated Statements of Cash Flows
       For the Six Months Ended June 30, 2009 and 2008 (Unaudited)........................................   5

     Notes to Condensed Consolidated Financial Statements (Unaudited) ....................................   6

     Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......   15

     Item 3. Quantitative and Qualitative Disclosure About Market Risk....................................   19

     Item 4T. Controls and Procedures.....................................................................   19

PART II - OTHER INFORMATION

     Item 6. Exhibits.....................................................................................   21

     Signatures ..........................................................................................   22

CERTIFICATIONS                                                                                            Exhibits
</TABLE>
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    AS OF JUNE 30, 2009 AND DECEMBER 31, 2008
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                     June 30,            December 31,
                                                                                       2009                  2008
                                                                              --------------------- --------------------
                                                                                    (Unaudited)
ASSETS
Current assets
<S>                                                                           <C>                   <C>
  Cash and cash equivalents                                                   $            2,321    $             980
  Accounts receivable, net of allowance for doubtful accounts of
   $0 in 2009 and 2008                                                                     1,817                1,951
  Prepaid expenses and other current assets                                                   62                  162
                                                                              --------------------- --------------------
       Total current assets                                                                4,200                3,093

Property and equipment, net                                                                  484                  649
Deferred tax asset                                                                         2,867                2,867
Other assets                                                                                 265                  271
                                                                              --------------------- --------------------
         TOTAL ASSETS                                                         $            7,816    $           6,880
                                                                              ===================== ====================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable and accrued expenses                                       $            1,462    $           1,802
  Current portion of capital lease obligations                                                 5                    6
  Current portion of notes payable                                                           173                  172
  Warrant liability                                                                          204                    -
  Dividends payable                                                                           79                  124
  Deferred revenue                                                                            67                   75
                                                                              --------------------- --------------------

       Total current liabilities                                                           1,990                2,179

Capital lease obligations, net of current portion                                              3                    7
Notes payable, net of current portion                                                        188                  274
                                                                              --------------------- --------------------

       Total liabilities                                                                   2,181                2,460
                                                                              --------------------- --------------------

Commitments and contingencies

Shareholders' equity
  Preferred stock, $0.0001 par value; 2,000,000 shares authorized;
    Series B Redeemable Preferred, 974 shares issued and outstanding in
    2009 and 2008; liquidation preference of $974,075;
    Series C Redeemable Preferred, 2,000 shares issued and outstanding                         -                     -
    in 2009 and 2008; liquidation preference of $2,000,000;
    Series D Redeemable Preferred, 100 shares issued and outstanding                           -                     -
    in 2009 and 2008; liquidation preference of $100,000.
  Common stock, $0.0001 par value; 50,000,000 shares authorized;
  10,839,166 and 10,311,968 shares issued in 2009 and 2008,
  respectively; and 10,799,239 and 10,272,041 shares outstanding in 2009
  and 2008, respectively                                                                       1                     1
  Additional paid-in capital                                                             117,307               116,862
  Accumulated deficit                                                                   (111,345)             (112,115)
                                                                              --------------------- --------------------
                                                                                           5,963                 4,748
  Common stock in treasury, at cost  - 24,371 shares                                        (328)                 (328)
                                                                              --------------------- --------------------
       Total shareholders' equity                                                          5,635                 4,420
                                                                              --------------------- --------------------

          TOTAL LIABILITIES AND SHAREHODERS' EQUITY                           $            7,816    $            6,880
                                                                              ====================  ====================
</TABLE>

See notes to condensed consolidated financial statements.                      3
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 and 2008
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                     Three Months Ended                   Six Months Ended
                                                                     ------------------                   ----------------
                                                                          June 30,                            June 30,
                                                                          --------                            --------
                                                                    2009              2008             2009              2008
                                                            ------------------ ----------------- ---------------- -----------------
Revenue                                                     $           2,880  $          2,346  $         5,174  $          4,301
                                                            ------------------ ----------------- ---------------- -----------------

Costs and expenses
<S>                                                                     <C>               <C>              <C>               <C>
  Operations, research and development                                  1,007             1,007            1,873             1,832
  Sales and marketing                                                     354               209              697               419
  General and administrative                                              640               664            1,380             1,450
  Depreciation and amortization                                            93                76              190               153
                                                            ------------------ ----------------- ---------------- -----------------
                                                                        2,094             1,956            4,140             3,854
                                                            ------------------ ----------------- ---------------- -----------------
Operating income                                                          786               390            1,034               447

Other (income) expense
  Change in fair value of warrant liability                                78                --               57               --
  Interest (income) expense, net                                            7                (1)              13               11
                                                            ------------------ ----------------- ---------------- -----------------

Income  before provision for income tax                                   701               391              964              436


Benefit from (provision for) income taxes                                 (17)               --              (32)           2,867
                                                            ------------------ ----------------- ---------------- -----------------

Net income                                                                684                391             932            3,303

Preferred stock dividends                                                 (79)              (202)           (158)            (375)
                                                            ------------------ ----------------- ---------------- -----------------

Net income  attributable to common shareholders             $             605  $             189 $           774  $         2,928
                                                            ================== ================= ================ ================

Basic  income  per share attributable
 to common shareholders                                     $            0.06  $            0.03 $          0.07  $          0.40
                                                            ================== ================= ================ ================

Diluted income  per share attributable
 to common shareholders                                     $            0.05  $            0.02 $          0.07  $           0.28
                                                            ================== ================= ================ ================

Basic weighted average common shares outstanding                       10,800              7,290          10,735             7,244
                                                            ================== ================= ================ ================

Diluted weighted average common shares outstanding                     11,016              9,473          11,054            10,874
                                                            ================== ================= ================ ================
</TABLE>
See notes to condensed consolidated financial statements.                      4
<PAGE>
                               DIRECT INSITE CORP
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                 FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                          For the Six Months Ended
                                                                                                   June 30,
                                                                                           2009              2008
                                                                                     ----------------- ------------------
<S>                                                                                     <C>              <C>
Cash flows from operating activities
 Net income                                                                             $        932     $        3,303

 Adjustments to reconcile net income
  to net cash provided by operations:
    Amortization and depreciation                                                                190               152
    Deferred taxes                                                                                --            (2,867)
    Stock based compensation expense                                                             290               333
    Change in fair value of warrant liability                                                     57                --

  Changes in operating assets and liabilities:
    Accounts receivable                                                                          134                17
    Prepaid expenses and other current assets                                                    107                51
    Accounts payable and accrued expenses                                                       (144)             (172)
    Deferred revenue                                                                              (8)              216
                                                                                     ----------------- ------------------
       Net cash provided by operations                                                         1,558             1,033
                                                                                     ----------------- ------------------
Cash flows used in investing activities:
    Expenditures for property and equipment                                                      (25)             (126)
                                                                                     ----------------- ------------------
Cash flows from financing activities:
    Payment of dividends on preferred stock                                                     (203)             (802)
    Proceeds from issuance of shares on exercise of warrants                                     100                --
    Principal payments on capital lease obligations                                               (4)              (22)
    Repayments of long-term debt                                                                 (85)              (50)
                                                                                     ----------------- ------------------
       Net cash used in financing activities                                                    (192)             (874)
                                                                                     ----------------- ------------------
Net increase  in cash and cash equivalents                                                     1,341                33

Cash and cash equivalents - beginning of period                                                  980             2,184
                                                                                     ----------------- ------------------
Cash and cash equivalents - end of period                                            $         2,321     $       2,217
                                                                                     ================= ==================
Supplemental Disclosures:

Cash paid for interest                                                               $           17      $         32
                                                                                     ================= ==================
Cash paid for income taxes                                                           $            4      $         30
                                                                                     ================= ==================

Non-cash investing and financing activities:
  Reduction in accrued liabilities through issuance of debt                          $            --     $        62
                                                                                     ================= ==================
  Dividends accrued and unpaid                                                       $            79     $       375
                                                                                     ================= ==================
  Reduction in accrued liabilities through issuance of common stock                  $           198     $        51
                                                                                     ================= ==================
  Derivative liability on adoption of EITF 07-5                                      $           147     $        --
                                                                                     ================= ==================
</TABLE>
See notes to condensed consolidated financial statements                       5

<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.   Interim Financial Information

     The  accompanying   unaudited  condensed   consolidated  interim  financial
     statements include the accounts of Direct Insite Corp. and its subsidiaries
     ("Direct  Insite"  or  the  "Company").   All  intercompany   balances  and
     transactions   have  been  eliminated  in   consolidation.   The  condensed
     consolidated  balance  sheet  as  of  June  30,  2009,  and  the  condensed
     consolidated  statements  of  income  and cash  flows for the three and six
     months ended June 30, 2009 and 2008,  have been prepared by the Company and
     are not audited. These unaudited,  condensed consolidated interim financial
     statements  have been prepared in  accordance  with  accounting  principles
     generally  accepted in the United  States of America for interim  financial
     information and with the  instructions to Form 10-Q.  Accordingly,  they do
     not include all of the  information  and  footnotes  required by accounting
     principles  generally accepted in the United States of America ("GAAP") for
     complete financial statements.  In addition,  the December 31, 2008 balance
     sheet data was derived from the audited consolidated  financial statements,
     but does not  include  all  disclosures  required  by GAAP.  These  interim
     condensed  consolidated  financial statements include all adjustments which
     management  considers  necessary for a fair  presentation  of the financial
     statements and consist of normal recurring items. The results of operations
     for the three and six  months  ended  June 30,  2009,  are not  necessarily
     indicative of results that may be expected for any other interim  period or
     for the full year.

     These unaudited condensed  consolidated financial statements should be read
     in conjunction with the audited consolidated financial statements and notes
     thereto  for the year ended  December  31, 2008  included in the  Company's
     Form-10K.  The  accounting  policies  used  in  preparing  these  unaudited
     condensed  consolidated  financial  statements  are  consistent  with those
     described  in  the  audited  December  31,  2008   consolidated   financial
     statements.

     Use of Estimates
     ----------------

     In preparing financial statements in conformity with accounting  principles
     generally  accepted  in the  United  States of  America,  management  makes
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities  and  disclosures of contingent  assets and  liabilities at the
     date of the condensed  consolidated  financial  statements,  as well as the
     reported  amounts of revenue  and  expenses  during the  reporting  period.
     Management  bases its  estimates on  historical  experience  and on various
     assumptions that are believed to be reasonable under the circumstances, the
     results  of which form the basis for making  judgments  about the  carrying
     values of assets and liabilities  that are not readily  apparent from other
     sources.  Disclosures that are particularly sensitive to estimation include
     revenue  recognition,  stock based compensation,  fair value of the warrant
     liability,  and the  valuation  allowance  on deferred  tax assets.  Actual
     results could differ from those estimates.

2.   The Company

     Direct Insite Corp.  was organized as a public  company,  under the laws of
     the State of  Delaware  on August 27,  1987.  Direct  Insite  operates as a
     Software as a Service provider ("SaaS"),  providing best practice financial
     supply chain automation and workflow efficiencies within the Procure-to-Pay
     (PTP) and  Order-to-Cash  (OTC) processes.  The Company's global Electronic
     Invoice Presentment and Payment ("EIP&P") services automate manual business
     processes such as complex  billing,  invoice  validation,  invoice-to-order
     matching, consolidation, dispute handling, and payment processing.

     As described in Note 9, the Company has three  customers that accounted for
     approximately  94.7% and 97.9% of the Company's  revenue for the six months
     ended June 30, 2009 and 2008, respectively. Loss of IBM or EDS would have a
     material adverse effect on the Company.

                                       6
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

3.   Change in Accounting Principle

     Effective January 1, 2009, the Company,  following the guidance of Emerging
     Issues Task Force 07-5,  "Determining  Whether an  Instrument  (or Embedded
     Feature)  Is  Indexed to an  Entity's  Own  Stock"  ("EITF  07-5") and that
     pronouncements  effect in  interpreting  Statement of Financial  Accounting
     Standards ("SFAS") Statement No. 133 "Accounting for Derivative Instruments
     and Hedging  Activities" ("SFAS 133"),  determined that a warrant issued in
     conjunction  with the guarantee of a credit facility  contained a provision
     whereby  the  exercise  price  could be  adjusted  upon  certain  financing
     transactions  at a lower  price  per  share  could no  longer  be viewed as
     indexed to the Company's  common stock.  As such,  the Company  changed the
     accounting for this warrant to a  "derivative"  under SFAS 133. As a result
     the Company recorded the warrant liability at the fair value of the warrant
     of $147,000 as of January 1, 2009 and  reclassified  its issuance date fair
     value from additional paid-in-capital. The cumulative effect on adoption of
     EITF 07-5 as of January 1, 2009 is as follows:
<TABLE>
<CAPTION>
      ---------------------------------------------------------- ----------------------------- ----------------------
                                                                 Additional Paid In Capital    Accumulated Deficit
      ---------------------------------------------------------- ----------------------------- ----------------------
                                                                                    ($ in thousands)
      ---------------------------------------------------------- ----------------------------- ----------------------
      <S>                                                                <C>                        <C>
      Balance December 31, 2008                                          $116,862                  ($112,115)
      ---------------------------------------------------------- ----------------------------- ----------------------
        Cumulative effect of change in accounting principle                  (141)                        (5)
                                                                 ----------------------------- ----------------------
      ---------------------------------------------------------- ----------------------------- ----------------------
      Balance January 1, 2009                                            $116,721                  ( $112,120)
                                                                 ========================      ===================
      ---------------------------------------------------------- ----------------------------- ----------------------
</TABLE>
4.   Stock Based Compensation

     Stock Options

     The Company  accounts for stock  options  using the fair value  recognition
     provisions of SFAS No, 123 (Revised 2004),  "Share-Based  Payment",  ("SFAS
     123(R)").  As a result,  for the three and six month periods ended June 30,
     2009 the  Company  recorded $0 and $9,000,  respectively,  in  compensation
     expense for the fair value of options.  For the three and six month periods
     ended June 30, 2008 the Company recorded $19,000 and $64,000, respectively,
     in  compensation  expense for the fair value of options.  At June 30, 2009,
     there was no  unrecognized  compensation  costs  related  to stock  options
     granted.

     Nonqualified  and  incentive  stock options have been granted to directors,
     officers and employees of the Company under our Stock Option Plans. Options
     generally  vest over 3 years and  expire  five  years  from the date of the
     grant.  At June 30, 2009,  3,454,468  shares were  authorized  for issuance
     under the stock option plans.  Awards that expire or are cancelled  without
     delivery of shares generally become available for issuance under the plans.
     The Company issues new shares to satisfy stock option exercises. There were
     no options  granted  during the six months ended June 30, 2009.  During the
     six months  ended June 30, 2008 the Company  issued  75,000  options with a
     weighted  average  grant date fair value of $69,000.  The fair value of the
     stock  options  granted  was  estimated  on the date of the grant using the
     Black-Scholes option pricing model (see Note 8).

     A summary of option  activity under the plans for the six months ended June
     30, 2009 is as follows:
<TABLE>
<CAPTION>
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
                                                                                   Weighted Average
                                               Shares         Weighted Average       Remaining       Aggregate Intrinsic Value
                                           (in thousands)      Exercise Price      Term (in years)      (in thousands)
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
   <S>                                         <C>                <C>                    <C>                  <C>
   Balance,January 1, 2009                     1,277              $0.62
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
       Granted                                    --                 --
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
       Exercised                                  --                 --
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
       Canceled                                   --                 --
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
       Forfeited                                 (17)             $1.75
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
   Balance, June 30, 2009                      1,260              $0.60                  2.1                  $557
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
   Exercisable, June 30, 2009                  1,260              $0.60                  2.1                  $557
   ------------------------------------ ----------------- --------------------- -------------------- -------------------------
</TABLE>
                                       7
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

4.   Stock Based Compensation (continued)

     The total fair value of options vested during the six months ended June 30,
     2009 and 2008 was $35,000 and $64,000, respectively.

     Restricted Stock Grants

     During the six months ended June 30, 2009 the Company granted 44,544 shares
     to  directors  as part of their  compensation.  The stock grants had a fair
     value of $49,000 based on the closing price of the stock on the date of the
     grant.  The stock  grants  vest over the two year  period  January  1, 2009
     through December 31, 2010.

     A summary  of the  status of the  Company's  restricted  non-vested  shares
     issued  pursuant to employment  and service  agreements as of June 30, 2009
     and changes during the six months ended June 30, 2009 is presented below:
<TABLE>
<CAPTION>
------------------------------------------ ---------------------------------- ---------------------------------------------

              Non-vested Shares                    Shares (in thousands)           Weighted-average Grant Date Fair Value
------------------------------------------ ---------------------------------- ---------------------------------------------
<S>                                                      <C>                                          <C>
Non-vested at January 1, 2009                             521                                         $2.21
------------------------------------------ ---------------------------------- ---------------------------------------------
Granted                                                    45                                         $1.09
------------------------------------------ ---------------------------------- ---------------------------------------------
Vested                                                   (152)                                        $2.10
------------------------------------------ ---------------------------------- ---------------------------------------------
Forfeited                                                  --                                            --
                                           -------------------------------------
------------------------------------------ ---------------------------------- ---------------------------------------------
Non-vested at June 30, 2009                               414                                         $2.13
                                           =====================================
------------------------------------------ ---------------------------------- ---------------------------------------------
</TABLE>
     For the  three  months  ended  June 30,  2009 and 2008  stock  compensation
     expense for stock grants was $140,000 and $134,000,  respectively.  For the
     six months  ended June 30,  2009 and 2008 stock  compensation  expense  for
     stock grants was $281,000 and $269,000, respectively. At June 30, 2009, the
     future  expected  expense for  non-vested  shares is  $771,000  and will be
     recognized  on a  straight-line  basis over the period July 1, 2009 through
     December 31, 2010.

5.   Fair Value of Financial Instruments

     SFAS No. 157, "Fair Value Measurements"  ("SFAS 157"),  defines fair value,
     establishes  a  framework  for  measuring  fair  value in  accordance  with
     generally accepted accounting principles, and expands disclosures about the
     price  that  would be  received  to sell an asset,  or paid to  transfer  a
     liability in an orderly  transaction  between  market  participants  at the
     measurement  date. SFAS 157 applies to all assets and liabilities  that are
     measured and reported on a fair value basis.

     SFAS 157 establishes a three-tier  fair value  hierarchy which  prioritizes
     the inputs used in measuring fair value as follows:

         Level 1 - Observable inputs such as quoted prices in active markets;
         Level 2 - Inputs, other than the quoted prices in active markets,  that
                   are observable either directly or indirectly;
         Level 3 - Unobservable  inputs in which there  is  little  or no market
                   data, which  require the reporting entity to develop its  own
                   assumptions.

     The following are the Company's major categories of liabilities measured at
     fair value on a recurring  basis at June 30, 2009,  categorized by the SFAS
     157 fair value hierarchy:

                                       8
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

5.   Fair Value of Financial Instruments (continued)
<TABLE>
<CAPTION>
     Fair Value  Measurements  at June 30, 2009 Using  Significant  Unobservable
     ---------------------------------------------------------------------------
     Inputs:
     ------

          Description                                    (Level 3)
   ----------------------------------------------    -----------------
          Liabilities:
          <S>                                             <C>
              Warrant liability                           $   204
                                                     =================
</TABLE>
     The following is a reconciliation  of the beginning and ending balances for
     the Company's liabilities measured at fair value on a recurring basis using
     significant  unobservable  inputs (Level 3) and a summary of the derivative
     warrant liability during the six months ended June 30, 2009:
<TABLE>
<CAPTION>
          Fair Value Measurements Using Significant Unobservable Inputs (Level 3):
          -------------------------------------------------------------------------
                                 Description                                 (Level 3)
   -----------------------------------------------------------------     -----------------
          Liabilities:
          <S>                                                                 <C>
             Balance at January 1, 2009                                       $  --

             Cumulative effect of the change in accounting
          principal, January 1, 2009                                            147

             Change in fair value included in operations                         57

                                                                         -----------------
              Balance, June 30, 2009                                          $ 204
                                                                         =================
</TABLE>
     The change in fair value  recorded for Level 3 liabilities  for the periods
     above are reported in other income (expense) on the consolidated  statement
     of operations.

6.   Warrant Liability

     The Company  accounts for certain  warrants as a derivative  liability (see
     Note 3.) using the fair value method at the end of each  quarter,  with the
     resultant gain or loss recognition  recorded against earnings.  The Company
     recognized a total non-cash  expense of  approximately  $78,000 and $57,000
     for the three and six months ended June 30, 2009,  respectively,  for these
     derivative  warrants.  The  fair  value  of  the  derivative  warrants  was
     determined using the Black -Scholes valuation model using the closing price
     stock price of $1.00, a volatility  rate of 104%, a risk free interest rate
     of 1.11% and a contractual life of 1.03 years.

7.   Debt

     Notes payable
     -------------

     At June 30, 2009 and December 31, 2008,  notes payable  consist of $361,000
     and $446,000,  respectively,  of borrowings  for the purchase of equipment.
     These notes bear  interest at rates ranging from 8.8% to 10.3% per year and
     mature through January 2012. The notes are  collateralized by the equipment
     purchased  with net book values of $278,000 and $396,000,  at June 30, 2009
     and December 31, 2008, respectively.

     Capitalized lease obligations
     -----------------------------

     The Company has  equipment  under a capital  lease  obligation  expiring in
     2011. The assets and  liabilities  under capital leases are recorded at the
     lower of the  present  values of the  minimum  lease  payments  or the fair
     values of the assets.  The interest rates  pertaining to this capital lease
     is 15.3%.

                                       9
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

7.   Debt (continued)

     At June 30,  2009,  the gross and net book value of the  related  assets is
     approximately $14,000 and $7,000,  respectively.  At December 31, 2008, the
     gross and net book value of the related  assets was  approximately  $38,000
     and $18,000, respectively.

8.   Shareholders' Equity

     The following table summarizes the changes in shareholders'  equity for the
     six months ended June 30, 2009:
<TABLE>
<CAPTION>
                     -------------------------------------------------- --------------------
                                                                             In thousands
                     -------------------------------------------------- --------------------
                            <S>                                                <C>
                            Balance, December 31, 2008                         $   4,420
                     -------------------------------------------------- --------------------
                            Cumulative  effect of change in accounting
                            principle                                             (  147)
                     -------------------------------------------------- --------------------
                            Balance - January 1, 2009                          $   4,273
                     -------------------------------------------------- --------------------
                               Dividends accrued                                  (  158)
                     -------------------------------------------------- --------------------
                               Stock based compensation                              290
                     -------------------------------------------------- --------------------
                                 Shares issued for settlement of
                                 accrued liabilities                                 198
                     -------------------------------------------------- --------------------
                                 Proceeds on exercise of warrants                    100
                     -------------------------------------------------- --------------------
                                 Net income                                          932
                                                                               -----------
                     -------------------------------------------------- --------------------
                            Balance - June 30, 2009                            $   5,635
                     -------------------------------------------------- -------=========----
</TABLE>
     Common Stock and Option Issuances
     ---------------------------------

     During  the six months  ended  June 30,  2009 the  Company  issued  180,000
     restricted common shares with a fair value of $397,000 based on the closing
     share price on the date of the grant to certain  officers under  employment
     agreements. The Company also issued 319,050 restricted common shares valued
     at $198,000 to directors in  settlement  of directors  fees accrued in 2006
     and 2007. The Company also issued 95,648 shares on exercise of warrants and
     received proceeds of $100,000.

     During  the six  months  ended  June 30,  2008 the  Company  issued  52,500
     restricted  common shares with a fair value of $95,000 based on the closing
     share price on the date of the grant to certain  officers under  employment
     agreements.  The Company also issued 1,552 restricted  common shares valued
     at $3,000 to a former employee for services in 2007, and 61,431  restricted
     common  shares  with a fair  value of $47,500 to an  employee  for  accrued
     compensation in 2007. During the six months ended June 30, 2008 the Company
     also issued  110,035 common shares on the exercise of 235,000 stock options
     on a cashless basis.

     During the six months  ended  June 30,  2008,  the  Company  issued  75,000
     options to an officer and a director to purchase common stock.  The options
     have an exercise  prices of $1.50 (the  trading  price of the shares at the
     date of the  grant)  and a fair  value at the grant  date of  $69,000.  The
     valuation  was  determined  using  the   Black-Scholes   method.   The  key
     assumptions  used were a volatility  of 98.1%,  dividend rate of 0%, a risk
     free rate of 1.9% and an expected life (using the simplified method) of 3.0
     years.

                                       10
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

8.   Shareholders' Equity (continued)

     Earnings Per Share
     ------------------

     The Company  displays  earnings per share in accordance  with SFAS No. 128,
     "Earnings Per Share".  SFAS No. 128 requires dual presentation of basic and
     diluted  earnings per share ("EPS").  Basic EPS includes no dilution and is
     computed by dividing net income (loss)  attributable to common shareholders
     by the weighted average number of common shares outstanding for the period.

     Diluted EPS includes the potential  dilution that could occur if securities
     or other  contracts to issue common stock were  exercised or converted into
     common stock. Outstanding stock options, warrants and other potential stock
     issuances  are not included in the  computation  when their effect would be
     anti-dilutive.  The  following  table  presents  the  shares  used  in  the
     computation  of  diluted  earnings  per share for the three and six  months
     ended June 30, 2009 and 2008 (in thousands):
<TABLE>
<CAPTION>
---------------------------------------------------- ------------------------------------- --------------------------------------
                                                          Three Months Ended June 30,            Six Months Ended June 30,
---------------------------------------------------- ------------------------------------- --------------------------------------
                                                             2009              2008               2009                2008
                                                             ----              ----               ----                ----
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       <S>                                                  <C>               <C>                <C>                  <C>
       Weighted Average Common shares outstanding           10,800            7,290              10,735               7,244
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Warrants to purchase common stock                        --              902                  --                 946
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Options to purchase common stock                        188            1,273                 292               1,330
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Restricted stock grants                                  28                8                  27                   7
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Series A Convertible preferred stock                     --               --                  --               1,347
                                                     ------------------ ------------------ ------------------- ------------------
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
       Total diluted shares                                 11,016             9,473             11,054              10,874
                                                     ================== ================== =================== ==================
---------------------------------------------------- ------------------ ------------------ ------------------- ------------------
</TABLE>

     Securities that could potentially dilute basic EPS in the future, that were
     not included in the computation of the diluted EPS consist of the following
     (in thousands):

<TABLE>
<CAPTION>
--------------------------------------------------- -------------------------------------- -------------------------------------
                                                        Three Months Ended June 30,            Six Months Ended June 30,
--------------------------------------------------- -------------------------------------- -------------------------------------
                                                               2009              2008                 2009               2008
                                                               ----              ----                 ----               ----
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       <S>                                                    <C>                <C>                 <C>                 <C>
       Options to purchase common stock                         830                93                  830                 93
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       Warrants to purchase common stock                        943               552                  943                552
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       Restricted stock grants                                  420               620                  420                620
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
       Series A Convertible preferred stock                      --             1,347                   --                 --
                                                    ----------------- -------------------- ------------------ ------------------
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
             Total potential common shares                    2,193             2,612                2,193              1,265
                                                              =====             =====                =====              =====
--------------------------------------------------- ----------------- -------------------- ------------------ ------------------
</TABLE>
     Subsequent to June 30, 2009,  the Company  redeemed all of the  outstanding
     Series B Redeemable  Preferred Stock ("Series B") in the amount of $974,000
     and recorded this amount as a reduction of Additional Paid- in Capital. The
     Company's Chairman and Chief Executive  Officer,  as a holder of the Series
     B, received $266,000 of the redemption amount.

9.   Products and Services

     The Company and its subsidiaries  currently operate in one business segment
     and provide two separate  products:  SaaS  services and custom  engineering
     services. The following table displays revenue by product (in thousands):
<TABLE>
<CAPTION>
                                   Three Months Ended June 30,     Six Months Ended June 30,
                                      2009           2008             2009           2008
                                     ------         ------           ------         ------
  <S>                                <C>            <C>              <C>            <C>
  SaaS fees                          $2,253         $1,823           $4,485         $3,652
  Custom engineering fees               627            523              689            649
                                     ------         ------           ------         ------
       Total Revenue                 $2,880         $2,346           $5,174         $4,301
                                     ======         ======           ======         ======
</TABLE>
                                       11
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


9.   Products and Services (continued)

     Major Customers
     ---------------

     For the three and six month periods ended June 30, 2009,  IBM accounted for
     28.3% and 31.8% of revenue,  respectively,  compared to 47.1% and 47.3% for
     the three and six month periods ended June 30, 2008, respectively.  For the
     three and six month  periods  ended June 30, 2009,  EDS accounted for 54.2%
     and 51.7% of  revenue,  respectively,  compared  to 44.4% and 47.0% for the
     three and six month  periods  ended June 30,  2008,  respectively.  For the
     three and six month  periods  ended June 30, 2009,  Siemens  accounted  for
     10.1% and 11.2% of revenue, respectively, compared to 6.0% and 3.6% for the
     three and six month  periods  ended June 30, 2008,  respectively.  Accounts
     receivable  from these  customers  amounted to $1,684,000 and $1,879,000 at
     June 30, 2009 and December 31, 2008, respectively.

10.  Income Taxes

     In its interim  financial  statements  the Company  follows the guidance in
     Accounting   Principles   Board  ("APB")  Opinion  28  "Interim   Financial
     Reporting"  and FIN 18 "Accounting  for Income Taxes in Interim  Periods an
     Interpretation of APB 28", whereby the Company utilizes the expected annual
     effective tax rate in determining its income tax provisions for the interim
     period's  income or loss. As the Company has significant net operating loss
     carry-forwards,  the approximate  effective  income tax rate applied to the
     six months  ended June 30, 2009 income was 3.3%.  The Company  accounts for
     income taxes using the liability method.  The liability method requires the
     determination  of  deferred  tax  assets  and  liabilities   based  on  the
     differences  between the financial statement and income tax basis of assets
     and liabilities,  using enacted tax rates.  Additionally,  net deferred tax
     assets are  adjusted by a valuation  allowance  if,  based on the weight of
     available evidence,  it is more likely than not that some portion or all of
     the net deferred tax assets will not be realized. The Company currently has
     significant  deferred tax assets consisting  predominately of net operating
     loss  carry-forwards.  SFAS No.  109,  "Accounting  for Income  Taxes ("FAS
     109"), requires a valuation allowance be established when it is more likely
     than not that all or a portion of deferred tax assets will not be realized.
     During the six months ended June 30, 2008,  the Company  reviewed  previous
     positive and  negative  evidence  and also  reviewed  its expected  taxable
     income for future  periods  and  concluded  that it is more likely than not
     that approximately $2,867,000 of tax benefits related to net operating loss
     carry-forwards will be utilized in future tax years and, therefore, reduced
     its  valuation  allowance  during  the six months  ended  June 30,  2008 in
     accordance  with APB 28. As a result the  Company's  effective tax rate for
     the three and six  months  ended June 30,  2008  differs  from the  current
     statutory  rates.  In addition,  the Company expects to provide a valuation
     allowance on the remaining future tax benefits until it can sustain a level
     of  profitability  that  demonstrates  its ability to utilize the remaining
     assets,  or other  significant  positive  evidence arises that suggests its
     ability to utilize  the  remaining  assets.  The  future  realization  of a
     portion  of its  reserved  deferred  tax  assets  related  to tax  benefits
     associated with the exercise of stock options,  if and when realized,  will
     not result in a tax benefit in the  consolidated  statement of  operations,
     but rather will result in an increase in  additional  paid in capital.  The
     Company  will  continue to re-assess  its  reserves on deferred  income tax
     assets in future periods on a quarterly  basis. The Company has elected the
     "with and without approach"  regarding ordering of windfall tax benefits to
     determine  whether the windfall tax benefit did reduce taxes payable in the
     current  year.  Under this  approach  the  windfall  tax  benefit  would be
     recognized in additional paid-in-capital only if an incremental tax benefit
     is realized after considering all other benefits presently available.

     At December 31, 2008,  the Company had federal and state net operating loss
     carryforwards  ("NOLs")  remaining  of  approximately  $72  million and $26
     million, respectively,  which may be available to reduce taxable income, if
     any. These NOLs expire through 2025.

                                       12
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

11.    New Accounting Pronouncements

     In  December  2007,  the FASB  issued  Statement  of  Financial  Accounting
     Standards ("SFAS") No. 141R,  "Business  Combinations" ("SFAS 141R"), which
     replaces  SFAS No.  141,  "Business  Combinations."  SFAS 141R  establishes
     principles and  requirements  for determining how an enterprise  recognizes
     and measures the fair value of certain assets and liabilities acquired in a
     business  combination,   including  non-controlling  interests,  contingent
     consideration, and certain acquired contingencies.  SFAS 141R also requires
     acquisition-related   transaction   expenses  and  restructuring  costs  be
     expensed as incurred rather than capitalized as a component of the business
     combination.  SFAS  141R  will  be  applicable  prospectively  to  business
     combinations for which the acquisition date is on or after the beginning of
     the first annual  reporting period beginning on or after December 15, 2008.
     SFAS 141R would have an impact on accounting  for any  businesses  acquired
     after the effective date of this pronouncement.

     In December 2007, the FASB issued SFAS No. 160, "Non-controlling  Interests
     in Consolidated  Financial  Statements - An Amendment of ARB No. 51" ("SFAS
     160").  SFAS 160  establishes  accounting  and reporting  standards for the
     non-controlling  interest  in  a  subsidiary  (previously  referred  to  as
     minority interests). SFAS 160 also requires that a retained non-controlling
     interest upon the  deconsolidation of a subsidiary be initially measured at
     its fair value. Upon adoption of SFAS 160, the Company would be required to
     report  any   non-controlling   interests   as  a  separate   component  of
     stockholders' equity. The Company would also be required to present any net
     income allocable to non-controlling  interests and net income  attributable
     to  the  stockholders  of  the  Company   separately  in  its  consolidated
     statements  of  operations.  SFAS 160 is effective  for fiscal  years,  and
     interim  periods within those fiscal years,  beginning on or after December
     15, 2008. SFAS 160 requires  retroactive  adoption of the  presentation and
     disclosure   requirements  for  existing  minority  interests.   All  other
     requirements  of SFAS 160 shall be  applied  prospectively.  SFAS 160 would
     have an impact on the  presentation  and disclosure of the  non-controlling
     interests of any non wholly-owned businesses acquired in the future.

     In March  2008,  the FASB issued SFAS 161,  "Disclosures  about  Derivative
     Instruments and Hedging Activities an amendment of FASB Statement No. 133",
     which amends and expands the disclosure requirements of SFAS 133 to require
     qualitative   disclosure   about   objectives   and  strategies  for  using
     derivatives, quantitative disclosures about fair value amounts of and gains
     and   losses   on   derivative    instruments,    and   disclosures   about
     credit-risk-related  contingent  features in  derivative  agreements.  This
     statement is effective  for the Company  beginning on January 1, 2009.  The
     adoption of this statement  changed the  disclosures  related to derivative
     instruments (warrant liability) held by the Company.

     In June 2008,  the FASB  ratified  EITF No. 07-5,  "Determining  Whether an
     Instrument  (or an Embedded  Feature) is Indexed to an Entity's  Own Stock"
     ("EITF  07-5").  EITF 07-5  provides  that an entity  should use a two-step
     approach to evaluate  whether an  equity-linked  financial  instrument  (or
     embedded  feature) is indexed to its own stock,  including  evaluating  the
     instrument's  contingent exercise and settlement  provisions.  EITF 07-5 is
     effective for financial  statements issued for fiscal years beginning after
     December 15, 2008. Early  application is not permitted.  See Note 3 for the
     impact of EITF 07-5 on the consolidated  financial condition and results of
     operations.

     In  June  2009,  the  FASB  issued  SFAS  No.  167,   "Amendments  to  FASB
     Interpretation No. 46(R)" ("SFAS 167"). SFAS 167 eliminates  Interpretation
     46(R)'s exceptions to consolidating  qualifying  special-purpose  entities,
     contains  new  criteria  for  determining  the  primary  beneficiary,   and
     increases the frequency of required  reassessments  to determine  whether a
     company is the primary  beneficiary of a variable interest entity. SFAS 167
     also contains a new requirement that any term, transaction,  or arrangement
     that does not have a substantive effect on an entity's status as a variable
     interest  entity, a company's power over a variable  interest entity,  or a
     company's  obligation to absorb losses or its right to receive  benefits of
     an  entity  must  be   disregarded  in  applying   Interpretation   46(R)'s
     provisions.  The  elimination  of  the  qualifying  special-purpose  entity
     concept  and its  consolidation  exceptions  means  more  entities  will be
     subject to consolidation assessments and reassessments.

                                       13
<PAGE>
                     DIRECT INSITE CORP. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

11. New Accounting Pronouncements (continued)

     SFAS 167 will be effective  January 1, 2010.  We do not expect the adoption
     of SFAS 167 to have any impact on our  financial  statements  or results of
     operations.

     In July 2009, the FASB issued SFAS No. 168, "The FASB Accounting  Standards
     Codification and the Hierarchy of Generally Accepted Accounting  Principles
     - a  replacement  of  FASB  Statement  No.  162"  ("SFAS  168").  SFAS  168
     establishes the FASB Accounting Standards Codification to become the source
     of  authoritative  U.S.  GAAP  recognized  by the  FASB  to be  applied  by
     non-governmental   entities.   Rules  and  interpretive   releases  of  the
     Securities  and  Exchange  Commission  (SEC)  under  authority  of  federal
     securities laws are also sources of authoritative GAAP for SEC registrants.
     On the effective date of this Statement,  the  Codification  will supercede
     all then-existing  non-SEC  accounting and reporting  standards.  All other
     nongrandfathered   non-SEC  accounting   literature  not  included  in  the
     Codification  will become  nonauthoritative.  SFAS 168,  which  changes the
     referencing  of financial  standards,  is  effective  for interim or annual
     financial  periods  ending after  September  15, 2009. We do not expect the
     adoption  of SFAS 168 to  materially  impact our  financial  statements  or
     results of operations.

     In May 2009,  the FASB  issued  SFAS No.  165,  "Subsequent  Events."  This
     Statement  sets forth:  1) the period  after the balance  sheet date during
     which   management  of  a  reporting   entity  should  evaluate  events  or
     transactions that may occur for potential  recognition or disclosure in the
     financial  statements;  2) the  circumstances  under which an entity should
     recognize events or transactions  occurring after the balance sheet date in
     its financial statements; and 3) the disclosures that an entity should make
     about events or  transactions  that occurred  after the balance sheet date.
     This  Statement is effective  for interim and annual  periods  ending after
     June 15, 2009. The company adopted this Statement in the quarter ended June
     30,  2009.  This  Statement  did  not  impact  the  Company's  consolidated
     financial position and results of operations.


12.  Subsequent Events

     The Company has evaluated events that occurred  subsequent to June 30, 2009
     through August 14, 2009, the date on which the financial statements for the
     period  ended June 30, 2009 were  issued.  Except as disclosed in Note 8 to
     these  financial  statements,  management  concluded  that no other  events
     required disclosure in these financial statements.

                                       14
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Forward looking statements

All statements  other than  statements of historical  fact included in this Form
10-Q including,  without limitation,  statements under, "Management's Discussion
and Analysis of Financial  Condition  and Results of  Operations"  regarding the
Company's financial position,  business strategy and the plans and objectives of
management for future operations, are forward-looking  statements.  When used in
this Form 10-Q, words such as  "anticipate,"  "believe,"  "estimate,"  "expect,"
"intend"  and  similar  expressions,  as  they  relate  to  the  Company  or its
management, identify forward-looking statements. Such forward-looking statements
are based on the  beliefs of  management,  as well as  assumptions  made by, and
information  currently  available to, the Company's  management.  Actual results
could  differ  materially  from  those   contemplated  by  the   forward-looking
statements  as a  result  of  certain  factors  including  but not  limited  to,
fluctuations in future operating results, technological changes or difficulties,
management  of future  growth,  the risk of errors or failures in the  Company's
software products,  dependence on proprietary  technology,  competitive factors,
risks associated with potential acquisitions,  the ability to recruit personnel,
the  dependence  on key  personnel,  and such other risk factors which may arise
from time to time  including,  but not limited to, the risk factors as set forth
in the  Company's  Reports  on Form 10K as filed  with the  Securities  Exchange
Commission. Such statements reflect the current views of management with respect
to future  events and are subject to these and other  risks,  uncertainties  and
assumptions relating to the operations,  results of operations,  growth strategy
and liquidity of the Company.  All subsequent  written and oral  forward-looking
statements  attributable  to the  Company  or  persons  acting on its behalf are
expressly qualified in their entirety by this paragraph.

Overview

Direct Insite Corp. and its  subsidiaries  (hereinafter  referred to at times as
"Direct Insite" or the "Company"),  was organized as a public company, under the
laws of the State of Delaware on August 27, 1987.  Direct  Insite  operates as a
Software as a Service  provider  ("SaaS"),  providing  best  practice  financial
supply chain  automation  and workflow  efficiencies  within the  Procure-to-Pay
(PTP) and Order-to-Cash (OTC) processes. The Company's global Electronic Invoice
Presentment and Payment ("EIP&P")  services  automate manual business  processes
such  as  complex  billing,  invoice  validation,   invoice-to-order   matching,
consolidation, dispute handling, and payment processing.

Direct  Insite is currently  delivering  service and  business  value across the
Americas,  Europe, and Asia,  including 62 countries,  15 languages and multiple
currencies. Direct Insite processes, hosts and distributes millions of invoices,
purchase orders, and attachment  documents making them accessible on-line within
an internet self service portal. Suppliers,  customers, and internal departments
such as Finance  and  Accounting  or  Customer  Service  users can access  their
business documents 24 hours per day, seven days per week, 365 days per year.

For the three and six months ended June 30, 2009,  IBM  accounted  for 28.3% and
31.8% of revenue,  respectively,  compared to 47.1% and 47.3% of revenue for the
three and six month  periods  ended June 30, 2008.  The decrease in revenue from
IBM is due to the  decrease  in  services  to IBM in Europe  resulting  from the
discontinuance  of  one  service  IBM  no  longer  required  and a  decrease  in
engineering  services resulting from the completion of deploying the IOL service
to all major geographies.  For the three and six months ended June 30, 2009, EDS
an HP company  ("EDS")  accounted for 54.2% and 51.7% of revenue,  respectively,
compared to 44.4% and 47.0% of revenue for the three and six month periods ended
June 30,  2008.  The  increase in revenue  from EDS results from an expansion of
services.  Siemens Shared  Services LLC accounted for 10.1% and 11.2% of revenue
for the three and six month periods ended June 30, 2009, respectively,  compared
to 6.0% and 3.6% of revenue for the three and six month  periods  ended June 30,
2008.

                                       15
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

Critical accounting policies

Our condensed  consolidated  financial  statements and the notes thereto contain
information  that is pertinent to  management's  discussion  and  analysis.  The
preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosures of contingent assets and liabilities. Management bases its estimates
on historical  experience and on various other  assumptions that are believed to
be reasonable under the  circumstances,  the results of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent  from other  sources.  On a continuing  basis,  management
reviews its estimates  utilizing  currently  available  information,  changes in
facts and circumstances, historical experience and reasonable assumptions. After
such  reviews,   and  if  deemed  appropriate,   those  estimates  are  adjusted
accordingly.  Actual results may vary from these estimates and assumptions under
different  and/or  future  circumstances.  Management  considers  an  accounting
estimate to be critical if:

     o    it requires assumptions to be made that were uncertain at the time the
          estimate was made; and

     o    changes in the estimate,  or the use of different  estimating  methods
          that could  have been  selected,  could have a material  impact on the
          Company's  condensed  consolidated  results of operations or financial
          condition.

The following critical  accounting policies have been identified that affect the
more  significant  judgments  and  estimates  used  in  the  preparation  of the
consolidated financial statements. We believe that the following are some of the
more critical judgment areas in the application of our accounting  policies that
affect our financial condition and results of operations.  We have discussed the
application of these critical accounting policies with our Audit Committee.  The
following  critical  accounting  policies are not intended to be a comprehensive
list of all of the Company's accounting policies or estimates.

Revenue Recognition
-------------------

We record revenue in accordance  with Statement of Position 81-1,  issued by the
American  Institute of Certified  Public  Accountants  and SEC Staff  Accounting
Bulletin  Topic  13  "Revenue  Recognition  in  Financial  Statements."  In some
circumstances,  we enter into  arrangements  whereby the Company is obligated to
deliver  to  its  customer   multiple   products   and/or   services   (multiple
deliverables).  In these  transactions,  in accordance  with the Emerging Issues
Task  Force  ("EITF")  Issue No.  00-21,  "Revenue  Arrangements  with  Multiple
Deliverables",  the Company  allocates  the total revenue to be earned among the
various  elements  based on their relative fair values.  The Company  recognizes
revenue related to the delivered products or services only if:

o    Any undelivered products or services are not essential to the functionality
     of the delivered products or services;

o    Payment for the  delivered  products or  services  is not  contingent  upon
     delivery of the remaining products or services;

o    We have an  enforceable  claim to receive the amount due in the event we do
     not deliver the  undelivered  products or services and it is probable  that
     such amount is collectible;

o    There is evidence of the fair value for each of the undelivered products or
     services;

o    Delivery  of  the  delivered  element  represents  the  culmination  of the
     earnings process.

     The following are the specific revenue recognition  policies for each major
     category of revenue.

                                       16
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

SaaS Services

We provide  transactional  data  processing  services  through our SaaS software
solutions to our  customers.  The customer is charged a monthly  fixed rate on a
per  transaction  basis or a fixed fee  based on  monthly  transaction  volumes.
Revenue is recognized as the services are performed.

Custom Engineering Services
---------------------------

We perform custom engineering  services which are single contractual  agreements
involving  modification  or  customization  of the  Company's  proprietary  SaaS
software  solution.  Progress  is  measured  using the  relative  fair  value of
specifically identifiable output measures (milestones). Revenue is recognized at
the lesser of the milestone  amount when the customer accepts such milestones or
the percentage of completion of the contract following the guidance of SOP 81-1,
"Accounting for  Performance of  Construction-Type  and Certain  Production Type
Contracts."

Cost of Revenue
---------------

Cost of  revenue in the  condensed  consolidated  statements  of  operations  is
presented along with operations, research and development costs and exclusive of
amortization and depreciation  shown  separately.  Custom  Engineering  Services
costs  related to  uncompleted  milestones  are  deferred  and included in other
current assets, when applicable.

Allowance For Doubtful Accounts
-------------------------------

The  allowance  for doubtful  accounts  reflects  management's  best estimate of
probable  losses  inherent  in  the  account  receivable   balance.   Management
determines  the  allowance   based  on  known  troubled   accounts,   historical
experience,  and  other  currently  available  evidence.  At June  30,  2009 and
December 31, 2008, an allowance for doubtful  accounts is not provided since, in
the opinion of management, all accounts are deemed collectible.

Impairment of Long-Lived Assets
-------------------------------

Statement of Financial  Accounting  Standards ("SFAS"),  No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("FAS 144") requires management
judgments  regarding the future  operating and disposition  plans for marginally
performing assets, and estimates of expected  realizable values for assets to be
sold. The Company accounts for its long-lived  assets in accordance with FAS 144
for purposes of  determining  and measuring  impairment of its other  intangible
assets. It is the Company's policy to periodically  review the value assigned to
its long lived assets,  including  capitalized  software  costs, to determine if
they have been  permanently  impaired by adverse  conditions.  If  required,  an
impairment  charge would be recorded  based on an estimate of future  discounted
cash flows. In order to test for recoverability, the Company compared the sum of
an undiscounted  cash flow projection from the related  long-lived assets to the
net  carrying  amount  of  such  assets.  Considerable  management  judgment  is
necessary to estimate  undiscounted  future operating cash flows and fair values
and,  accordingly,  actual results could vary significantly from such estimates.
No impairment  charges were recognized during the six months ended June 30, 2009
and 2008, respectively.

Income Taxes
------------

We currently have significant deferred tax assets. SFAS No. 109, "Accounting for
Income Taxes"("FAS 109"),  requires a valuation allowance be established when it
is more likely than not that all or a portion of deferred tax assets will not be
realized.  Furthermore, FAS 109 provides that it is difficult to conclude that a
valuation  allowance  is not needed  when  there is  negative  evidence  such as
cumulative losses in recent years. Therefore, cumulative losses weigh heavily in
the overall  assessment.  The future  realization  of a portion of our  reserved
deferred  tax assets  related to tax  benefits  associated  with the exercise of
stock  options,  if and when  realized,  will not result in a tax benefit in the
consolidated  statement of operations,  but rather will result in an increase in
additional  paid in capital.  We will  continue  to  re-assess  our  reserves on
deferred income tax assets in future periods on a quarterly basis (see note 9 to
the Condensed Consolidated Financial Statements).

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                      DIRECT INSITE CORP. AND SUBSIDIARIES

Use of Estimates
----------------

In preparing  financial  statements in  conformity  with  accounting  principles
generally  accepted  in the  United  States of  America,  our  management  makes
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and disclosures of contingent  assets and liabilities at the date of
the  consolidated  financial  statements,  as well as the  reported  amounts  of
revenue and expenses during the reporting period.  Certain items,  among others,
that are  particularly  sensitive to estimates  are revenue  recognition,  stock
based  compensation,  fair  value  of  warrant  liabilities  and  the  valuation
allowance  on  deferred  tax  assets.  Actual  results  could  differ from those
estimates.

Results of operations

For the three and six month  periods  ended  June 30,  2009 we had net income of
$684,000  and  $932,000,  respectively,  compared to net income of $391,000  and
$3,303,000   for  the  three  and  six  month   periods  ended  June  30,  2008,
respectively.  During the six months ended June 30, 2008,  we recorded a benefit
from income taxes of $2,867,000 as a result of reducing the valuation  allowance
on our deferred tax assets for net operating loss  carry-forwards we more likely
than not expect to utilize in future years.

For the three and six months  ended June 30,  2009  revenue  increased  $534,000
(22.8%) to $2,880,000 and $873,000 (20.3%) to $5,174,000, respectively, compared
to revenue of $2,346,000 and $4,301,000, for the three and six months ended June
30, 2008, respectively.  This increase is primarily the result of an increase in
our recurring SaaS IOL services revenue of $430,000 (23.6%) for the three months
ended June 30, 2009 and an increase of $833,000 (22.8%) for the six months ended
June 30, 2009,  resulting  from an increase in our services to EDS and Shell and
other  customers.  Engineering  services revenue  increased  $104,000 (19.9%) to
$627,000  and  $40,000  (6.2%) to $689,000  for the three and six month  periods
ended June 30, 2009,  respectively,  compared to engineering services revenue of
$523,000  and  $649,000  for the  three  and six  months  ended  June 30,  2008,
respectively. This increase is primarily due to an increase in services to EDS.

Costs of operations,  research and development  remained level at $1,007,000 for
the three  months ended June 30, 2009  compared to the same period in 2008.  For
the six months ended June 30, 2009 cost of operations,  research and development
increased  $41,000 (2.2%) to $1,873,000  compared to costs of $1,832,000 for the
six months ended June 30, 2008. These costs consist  principally of salaries and
related expenses for software developers, programmers, custom engineers, network
services,  and  quality  control  and  assurance.  Also  included  are  cost for
purchased services,  network costs, costs of the production co-location facility
and  other  expenses  directly  related  to  our  custom  engineering  and  SaaS
production services.  During the three and six month periods ended June 30, 2009
cost of goods sold  increased  $166,000 and $364,000,  respectively  compared to
costs for the same  periods in 2008 due to an  increase  in costs for  purchased
services  for  outsourcing  certain  services  in support  of a new IOL  product
offering to one customer.  This was offset by a decrease in professional fees of
$137,000  and  $143,000  for the  three  and six  months  ended  June 30,  2009,
respectively,  compared to costs for such  services in 2008. In 2008 the Company
engaged  contract  development  staff to  support  the  implementation  of a new
service  to one  customer.  Also  during the six  months  ended  June 30,  2009,
salaries  and related  costs  decreased  $147,000  compared to cost for the same
period in 2008 due to the  reassignment  of  personnel  to sales and  marketing.
Other costs of operations  and research and  development  decreased  $29,000 and
$33,000 for the three and six months ended June 30, 2009, respectively, compared
to other costs in the same periods in 2008.

Sales and marketing  costs increased  $145,000  (69.4%) to $354,000 and $278,000
(66.3%) to $697,000  for the three and six month  periods  ended June 30,  2009,
compared to costs of $209,000 and  $419,000 for the three and six month  periods
ended  June 30,  2008,  respectively.  The  increase  is due to an  increase  in
personnel costs of $126,000 and $245,000 for the three and six months ended June
30,  2009  compared  to costs for the same  periods  in 2008.  The  increase  in
personnel  costs  is  primarily  due  to  the  addition  of  personnel  and  the
reassignment  of  personnel  from  other  departments  in  support  of  new  and
continuing  clients.  All other sales and marketing costs increased  $19,000 and
$33,000 for the three and six months ended June 30, 2009 compared to other costs
for the same periods in 2008.

General and  administrative  costs decreased  $24,000 (3.6%) to $640,000 for the
three  months  ended June 30,  2009,  compared to costs of $664,000 for the same
period in 2008.  For the six months  ended June 30, 2009 these  costs  decreased

                                       18
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

$70,000 (4.8%) to $1,380,000 compared to costs for the six months ended June 30,
2008. The decrease for the three months ended June 30, 2009 is  principally  due
to a decrease in professional  fees of $50,000.  In 2008 the Company had engaged
an investment  advisor which did not continue in 2009. All other costs increased
$26,000 net  compared to the same period in 2008.  For the six months ended June
30, 2009 salaries and related costs decreased $66,000 primarily as a result of a
decrease in stock  compensation  costs, and professional  fees decreased $69,000
again the  result of not  engaging  an  investment  advisor  in 2009.  Legal and
accounting  fees  increased  $64,000  for the six  months  ended  June 30,  2009
compared  to costs  for the same  period  in 2008  due to costs  incurred  for a
registration  statement.  All other general and  administrative  costs  increase
$1,000 net compared to the same period in 2008.

Amortization and depreciation expense was $93,000 and $190,000 for the three and
six months ended June 30, 2009, respectively, an increase of $17,000 (22.4%) and
$37,000  (24.2%) over costs for the same periods in 2008. The increase is due to
the purchase of equipment  for our second  collocation  date center  facility in
late 2008 and the purchase of new accounting software in 2008.

Other  expense for the three and six months ended June 30, 2009  consists of the
change  in the fair  value of the  warrant  liability  of  $78,000  and  57,000,
respectively.

Interest expense, net, was $7,000 and $13,000 for the three and six months ended
June 30, 2009,  respectively,  compared to interest  income,  net, of $1,000 and
interest expense,  net, of $11,000 for the same periods in 2008. The increase is
principally  due to an  increase  in  borrowings  to finance  capital  equipment
acquisitions.

Financial Condition and Liquidity

Cash provided by operating activities for the six months ended June 30, 2009 was
$1,558,000  compared to cash provided by operating  activities of $1,033,000 for
the six months  ended June 30, 2008.  This  consisted of net income of $932,000,
increased by non-cash  income and expenses of $537,000,  including  depreciation
and amortization of property and equipment of $190,000, stock-based compensation
expense of $290,000 and the change in the fair value of the warrant liability of
$57,000.  In addition  accounts  receivable  decreased  by $134,000  and prepaid
expenses  decreased  $107,000.  Accounts payable and accrued expenses  decreased
$144,000 and deferred revenue decreased $8,000.

Cash used in investing  activities was $25,000 for the six months ended June 30,
2009,  compared  to  126,000  for  same  period  in 2008.  This was  principally
expenditures for equipment.

Cash used in financing activities totaled $192,000 for the six months ended June
30, 2009, compared to cash used in financing  activities of $874,000 for the six
months ended June 30, 2008. We paid $203,000 in dividends on preferred stock and
repaid $89,000 of long-term debt and capital lease  obligations in the first six
months  of 2009 and we  received  proceeds  from the  exercise  of  warrants  of
$100,000.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are reasonably likely to
have,  a current or future  effect on our  financial  condition,  changes in our
financial  condition,  revenues or expenses,  results of operations,  liquidity,
capital expenditures or capital resources that are material to investors.


Item 3. Quantitative and Qualitative Disclosure About Market Risk

       Not applicable

Item 4T.  Controls and Procedures

       Evaluation of Disclosure Controls and Procedures
       -------------------------------------------------

                                       19
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES


     The Company maintains disclosure controls and procedures designed to ensure
     that information  required to be disclosed in the reports it files with the
     SEC is accumulated and communicated to management, as appropriate, to allow
     timely decisions  regarding  required  disclosure,  and such information is
     recorded,  processed,  summarized  and  reported  within  the time  periods
     specified in the SEC's rules and forms.  Under the supervision and with the
     participation of our management,  including our Chief Executive Officer and
     Chief  Financial  Officer,  we  have  evaluated  the  effectiveness  of our
     disclosure  controls  and  procedures  as such term is defined by the rules
     established under the Securities Exchange Act of 1934.

     Based  on our  evaluation  which  took  place  as of  June  30,  2009  (the
     "Evaluation  Date"), we believe that these procedures were not effective as
     a result  of  limited  resources  and a  limited  segregation  of duties in
     accounting and financial  reporting.  More specifically,  the Company has a
     limited  number  of  personnel  in the  finance  and  accounting  area  and
     therefore one person performs various accounting  functions where a greater
     segregation  of duties  would  permit  checks and balances and reviews that
     would improve internal control. The Company has been aware of this material
     weakness  since  January  2004 at which  time the  staff of the  accounting
     department was reduced.  As a result the Chief  Financial  Officer  devotes
     substantive time to reviewing the accounting records and financial reports.
     The Company intends to employ a qualified  accountant in the second half of
     2009 and the Company expects that it will reassign certain responsibilities
     and tasks previously performed by the Chief Financial Officer and that this
     will  improve  internal  disclosure  controls and  internal  controls  over
     financial reporting

     Changes in Internal Control Over Financial Reporting
     ----------------------------------------------------

     The Company  maintains a system of  internal  controls  designed to provide
     reasonable  assurance  that  transactions  are executed in accordance  with
     management's general or specific  authorization;  transactions are recorded
     as  necessary  to  (1)  permit  preparation  of  financial   statements  in
     conformity  with  accounting  principles  generally  accepted in the United
     States of America,  and (2) maintain  accountability for assets.  Access to
     assets  is  permitted  only in  accordance  with  management's  general  or
     specific  authorization.  In 2007 the Company  adopted and  implemented the
     control  requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the
     "Act").

     There  was no change  in the  Company's  internal  control  over  financial
     reporting  during the  Company's  last fiscal  quarter that has  materially
     affected,  or is  reasonably  likely to  materially  affect,  the Company's
     internal control over financial reporting.

     It is the  responsibility  of the  Company's  management  to establish  and
     maintain adequate internal control over financial  reporting.  However, due
     to its limited financial  resources,  there is only limited  segregation of
     duties within the accounting function,  leaving most significant aspects of
     financial reporting in the hands of the CFO.

     Our  independent  auditors have reported to our Board of Directors  certain
     matters  involving   internal   controls  that  our  independent   auditors
     considered to be a reportable  condition and a material  weakness as of the
     Evaluation  Date,  under  standards   established  by  the  Public  Company
     Accounting  Oversight Board. As previously stated, the reportable condition
     and  material  weakness  relates to limited  segregation  of duties and the
     absence  of  reviews  and  approvals  beyond  that  performed  by the Chief
     Financial  Officer as  mentioned  above,  of  transactions  and  accounting
     entries. The Company believes that the employment of a qualified accountant
     as discussed above will improve internal control over financial reporting.


                                       20
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION




Item 6. Exhibits


     31   Certifications  pursuant  to Rules  13a-14(a)  as adopted  pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

     32   Certifications  pursuant to 18 U.S.C. Section 1350 as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.


                                       21
<PAGE>
                      DIRECT INSITE CORP. AND SUBSIDIARIES

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.




DIRECT INSITE CORP.




/s/  James A. Cannavino
------------------------------------------------------
James A. Cannavino, Chief Executive Officer               August 14, 2009



/s/ Michael J. Beecher
------------------------------------------------------
Michael J. Beecher,  Chief Financial Officer              August 14, 2009



                                       22